Methods of Transferring Home Ownership

As a homeowner, you’ll usually think of transferring ownership of property through a sale. But there are also other methods that ownership can be transferred. Here are the following methods:

  1. Sale – the owner agrees to hand over title in exchange for consideration, usually completed with a deed
  2. Gift – the transfer of title without receiving something of value
  3. Dedication – when someone dedicates private property for public use such as land to be used as a new neighborhood park
  4. Grant – the government transfers title to land to an individual. For example, the government may grant land to a railroad company or to a university to build a school.

You can think of the 4 types above as “voluntary” home ownership transfer. But there are also times that ownership can transfer “involuntarily” which will be discussed next.

Involuntary Transfer of Title to Property

In real estate, it’s also possible that there is involuntary transfer of title that occurs against the will of the owner or without the action of the owner. For example, this can occur during foreclosure when a lender takes over property that was used as collateral to secure a loan.

To understand involuntary transfer you must first learn about encumbrances. Fancy word.

What are encumbrances?

Encumbrances is the term for ownership restrictions and limitations placed on the property by public or private entities. These can have adverse effects on both the use and value of the property.

Types of Encumbrances:

Covenants, Conditions, and Restrictions: limit the way a property owner can use the property. You can find these in the deed or plat of the property and they are promises you are making as the owner on how to use the property and it is enforceable by court.

Easements: right to use land in a specified manner given from the owner to another party. For example, if you’re property lacks entrance from a street and your neighbor’s property sits between you and the main street, he may grant you use of a section of his land to build a driveway from the main street back to your house.

Liens: a claim on a property as either a security for a debt or a fulfillment of some monetary obligation. When you are searching investment property to purchase you’ll come across properties often that have tax liens on them meaning the previous owner didn’t pay their property taxes and had the property taken from them by the city or still owns the property but the new owner who purchases the property will be responsible for paying off the lien. Another common example is mortgage liens when someone takes on a mortgage or 2nd mortgage.

Adverse Selection: Individuals can acquire title to land they do not own because they have possessed it for a statutory period of time, usually 7 to 20 years. An example case would be if you decided to put up a fence to separate your land from your neighbors and neither of you had a surveyor come out to check the property legal description. You build this fence on part of your neighbors land and he never objects and you thought you owned that land anyway so 7 to 20 years goes buy and your neighbor finds out when he goes to sell his house that part of his land is on your side of the fence. He’s likely lost the land to adverse selection, which referring to the definition means you gained title to land you did not own because you possessed it for a statutory period of time.

Encroachments: Unauthorized intrusion or invasion of a fixture, building, or other improvement onto another persona property. In the previous example we talked about the fence scenario. If the homeowner discovers the land dispute where the fence was built, he can force removal of the encroachment of the fence on his property. If he fails to dispute it, then it can become adverse selection.

Profit a prendre: non-possessory interests in real property that permits the holder to remove part of the soil or produce of the land.

Now you are aware of the 6 different encumbrances that you have to watch out for when purchasing or owning real estate.

If you notice people are using your property, put a stop to it if you can or discover why they are using it and if there is anything you can do. Encountering private restrictions on real estate can mean the rejection of a potential deal you originally sought to invest in so be sure to do your due diligence.

Other instances of involuntary alienation include:

Property Transfer Through Death – Devise & Descent

Along with voluntary and involuntary methods described above, there is chance that someone passes away and thus the ownership of their property will be transferred. The two methods include:

  1. Transfer by Devise – when a person dies with a will, the property gets transferred to heirs as indicated in the will. The property is usually distributed through a process called probate.
  2. Transfer by Descent – when a person dies without a will, his or her property automatically descends to his natural heirs as provided for by state law. This can include spouses, children, and relatives.

If a property owner dies and there are no heirs or creditors, the property can revert to the state through the process of escheat.

Lastly, when title of ownership is transferred it’s important that the deed gets recorded with the county’s recorder office so that it becomes public knowledge. You’ll have to pay a recorder’s fee and the acknowledgement from an official will be required to record the document.

Thanks for reading today’s post on transfer of title and encumbrances to be aware of.

Contact Kevin Foy, Realtor

Kevin is a real estate broker-associate with RE/MAX Oak Crest Realty in Elkhart, Indiana and has served real estate clients for over 35+ years in Northern Indiana and Southern Michigan.

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